In particular [1]} provide a theoretical framework jointly determining both the set of trading partners and their trade volumes, that can be estimated using the H2S selection model [2]}: they develop a model of international trade in which firms face fixed and variable costs of exporting and where productivity varies both firm- and destination-based. Trade channels depend on its profitability, therefore for any pair of countries there may be no firm productive enough to profitably export. As a result, the model it is consistent with zero trade flows in both directions between some countries, as well as positive — though asymmetric — trade flows in both directions for some country pairs. Finally, the model generates a gravity equation.
